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Afren Completed the Kurdistan Acquisition & Financing

Source: www.gulfoilandgas.com 11/2/2011, Location: Middle East

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Afren plc has completed the acquisition of a 60 percent participating interest in the Barda Rash PSC and 20 percent participating interest in the Ain Sifni PSC, located in the Kurdistan region of Iraq, and executed a corporate credit facility for up to US$200 million in connection with the acquisition.

Further to the announcement of 27th July, Afren has completed the acquisition of interests in two contiguous Production Sharing Contracts (PSCs) located in the Kurdistan region of Iraq, a 60 percent participating interest in the Barda Rash PSC and a non-operated 20 percent participating interest in the Ain Sifni PSC, for a total acquisition cost of US$588.25 million.

Afren has also executed a US$200 million secured term loan facility in connection with the Acquisition. The facility has a maturity of 18 months, with quarterly repayments commencing six months following the date of draw down. The Mandated Lead arrangers of the facility are BNP Paribas and VTB Capital.

Highlights
The Acquisition represents a highly complementary extension of the Company's existing portfolio, and offers a combination of near term development upside and substantial low risk exploration potential. The Acquisition delivers independently certified 890 mmbbls net 2C resources and total net un-risked resources of 1,074 mmbbls

Acquisition cost and funding
· Total acquisition cost of US$588.25 million (US$0.66 per 2C bbl) inclusive of US$81.0 million back costs and US$14 million towards 2011 capex related to Ain Sifni
· US$388.25 million of the acquisition cost due on completion and US$200 million in six months, to be funded using a combination of existing resources, including the US$200 million Loan Facility, US$184.5 million raised through the equity placing in July 2011 and reported cash at bank of US$320.4 million as at 30 June 2011, of which US$215 million is available for acquisitions

A clear forward plan to develop Barda Rash and appraise Ain Sifni
· Progressive short term conversion of 2C resources into 2P reserves, upon submission of the Field Development Plan, expected in Q1 2012
· Phased development initially focusing on light oil reservoirs expected to deliver 75,000 bopd net to Afren within 5 years from Barda Rash alone: Phase 1: 15,000 bopd (gross) by end 2012; Phase 2: 35,000 bopd (gross) by end 2013; Phase 3: 125,000 bopd (gross) by end 2017.

Delivers low risk exploration upside to portfolio - 183 mmbbls net best estimate prospective resources
· Active E&A drilling campaign 2011 - 2012

Complementary to Afren's core strengths developed in Nigeria
· Early mover advantage
· Geologically de-risked
· Fast track development solution
· Low risk E&A upside
· Afren strategically advantaged through historic relationships
· Positive political trends will eliminate valuation discount

Team on the ground and in place to deliver work programme
· Reinforced in-house technical capability to successfully develop fractured carbonate reservoirs

Osman Shahenshah, Chief Executive of Afren, commented: 'We are delighted to have completed our recently announced Kurdistan acquisition and the associated term loan arranged by VTB and BNP Paribas. The acquisition covers the full E&P spectrum of development, appraisal and low risk exploration upside and is consistent with Afren's strategy of acquiring low cost barrels in areas of strategic advantage. The acquisition increases Afren's current 2P and 2C recoverable reserves base by over 700% at a cost of under US$1 per barrel. With our team already in place, we expect to generate an incremental 75,000 barrels of oil per day net to Afren within five years from the Barda Rash field alone.'

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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